Section 44ADA of ITA, 1961 : Section 44Ada: Special Provision For Computing Profits And Gains Of Profession On Presumptive Basis

Explanation using Example

Imagine Dr. Smith, a dentist residing in India, whose total gross receipts from his dental practice in the previous year were ₹40 lakhs. Under Section 44ADA of the Income-tax Act, 1961, Dr. Smith can opt for a presumptive taxation scheme because his gross receipts do not exceed ₹50 lakhs.

By choosing this scheme, he is allowed to declare 50% of his gross receipts, which is ₹20 lakhs, as his income for the year, and this amount is considered as his net income without any further deductions for expenses or depreciation.

If Dr. Smith believes that his actual profits are lower than ₹20 lakhs, and his total income is above the taxable limit, he must maintain proper books of account, get them audited, and submit an audit report as per the requirements of the Income-tax Act.